What is competitiveness?
There are actually a number of definitions out there. The World Economic Forum, which has been measuring competitiveness among countries since 1979, defines it as “the set of institutions, policies and factors that determine the level of productivity of a country”. Others are subtly different but all generally use the word “productivity”. Another way to think about what makes a country competitive is to consider how it actually promotes our well-being. A competitive economy, we believe, is a productive one. And productivity leads to growth, which leads to income levels and hopefully, at the risk of sounding simplistic, improved well-being. Why should we care about it? Productivity is important because it has been found to be the main factor driving growth and income levels. And income levels are very closely linked to human welfare. So understanding the factors that allow for this chain of events to occur is very important. Basically, rising competitiveness means rising prosperity. At the World Economic Forum, we believe that competitive economies are those that are most likely to be able to grow more sustainably and inclusively, meaning more likelihood that everyone in society will benefit from the fruits of economic growth. How do we measure it? Break down countries’ competitiveness into 12 distinct areas, or pillars, which group into three sub-indexes. These are “basic requirements” which comprise institutions, infrastructure, macroeconomic environment and health and primary education. We call these “basic” as these pillars tend to be those that countries at earlier stages of development tackle first. Next comes the “efficiency enhancers” sub-index. Essentially we’re looking at markets – whether it is the functioning of goods, labour or financial markets – but we also consider higher education and training, and technological readiness, which measures how well economies are prepared for the transition into more advanced, knowledge-based […]
